The Boeing debacle: Seven lessons every CEO must learn

This article by Steve Denning published by Forbes is doing the rounds at present. It's highlighting the mechanical problems faced by the 787s that is costing Boeing more money on a project that was already over budget. But it's not specifically a Boeing bashing piece.

It highlights the 787 project as one example as part of the broader issue of offshoring.

1. Use the right metrics to evaluate offshoring
2. Review whether earlier outsourcing decisions made sense
3. Don't outsource mission-critical components
4. Bring some manufacturing back
5. Adequately assess the risk factors of off-shoring
6. Adequately value the role of innovation
7. Get to the root of the problem: maximising shareholder value

You can read the whole article here and while I believe it provides a good rationale for approaching the question of offshoring for enterprises, it also provides some good foundations for an industry policy.

Offshoring in the west. Viable in the long-term or just lucky?

I found this a very interesting article to come out of WalesOnline. Major multi-national Tata, which makes everything from trucks to tea, has invested £800M in Welsh steelworks facilities. The Tata Steel spokesperson said the reasons for this investment were because of the quality of the workforce, strong industrial relations and a supportive Welsh government.

It's welcome news for the 8000 people employed by Tata in Wales, but more broadly offers an interesting twist on the offshoring issue and its implication for Western manufacturers.

Could manufacturers in the US, Europe and other western nations be genuinely considered as viable offshoring alternatives for the big manufacturers? eg those from India and China. The majority of economic arguments up to now would say otherwise.

Two of the reasons why you might think western manufacturing nations were unattractive offshoring alternatives; a quality (highly paid?) workforce and industrial relations practices, were some of the reasons why Tata were drawn to investing in Wales. Are these features that much of an enticement for overseas investment?

Another byproduct of the success was the Welsh government was able to 'on-sell' education via its FE colleges to the Indian education department - this may have helped seal the deal.

What do you think? Is it a viable alternative for western manufacturers to attract BRIC-type (Brazil, Russia, India, China) investment?

When companies shouldn't outsource manufacturing

An excerpt from an article in Industry Week, by Jeff Wallingford, vice president, Supply Chain Strategy, Riverwood Solutions.

* * * *

The trend to outsource manufacturing has been going strong for two decades. Recently, it has been popular to speculate on whether this trend has gone too far... There are still many cases where a company may benefit by choosing in-house manufacturing over outsourcing - but only when these cases truly apply:

• a company's manufacturing process is the source of its competitive advantage
• a firm does something in a unique way and does not want competitors to know how to do it
• a competitive market for the specific manufacturing service does not exist
• there is no opportunity for the service provider to leverage their fixed capital, common overhead, specific purchasing power, or expertise
• to capture a limited and critical resource or channel
• it is too costly to outsource the manufacturing process because of the additional costs driven by outsourcing

Click here to read the full article.

Forget onshoring (reshoring) - what about MIMOC?

Do you ever a read a post and say to yourself "Man, this person is smart!". I've only read a few posts by AJ Sweatt and all fill me with excitement and envy. In a post dated October 2011 (nothing like keeping my finger on the pulse), he discusses reshoring and how the concept is important in redressing the balance of unneccesarily lost jobs overseas, but ultimately not sustainable.

Instead he suggests MIMOC - Manufacturing in Markets of Consumption, which apparently has been around for years. Known by Coca-Cola and many well-known auto manufacturers, the process specifically locates production locally for exposure to local markets. Makes sense.

The benefits of MIMOC are:

• it encourages exports
• it’s sustainable
• it simplifies politics & public opinion
• it creates jobs
• it creates, nurtures & moderates the global manufacturing network

I also like his point that MIMOC gives corporations an "out". Corporations can relocate operations based on where the local market is situated. No need to admit failure over an unsuccessful offshoring initiative.

Click here to read the full article. 

Manufacturing and innovation - tied together

Detroit is synonymous with the US auto industry and as such, experienced the worst of the industry's downturn over the past 30 years. So you may be excused for thinking an article on manufacturing from The Detroit News may carry baggage, but the author Mark Benvenuto uses the past troubles as a good example of the importance of an intrinsic link between innovation and manufacturing.

The most salient point for me was the theory that didn't work - namely the practice of shipping production overseas, whil hoping to retain the idea factories locally.

"To believe that is to misunderstand something fundamental: many of the most valuable innovations happen close to production, where scientists, engineers and researchers have tangible problems before them to solve."

He also mentions an admirable initiative from the American Chemical Society, which is awarding chemical scholarships to encourage innovation and job creation in the chemical sciences.

There are plenty of lessons we can learn from Detroit.

Click here to read the full article.

The disappearing of exports

An opinion piece in the New York Times explores and compares the world of a politician and that of the CEO. Politicians see the world as dominated by voter geography, while CEOs see the world as a global supply chain where anything can be sourced, made and sold.

The author, Thomas Friedman, quotes a Hong Kong manufacturer who says, “Source everywhere, manufacture everywhere, sell everywhere. The whole notion of an ‘export’ is really disappearing.”

But until we vote a one global community, the tension will still exist. So the focus of our elected officials is as key enablers; immigration for the skills, protection of ideas, funding research and provision of logistical infrastructure.

Freidman also alludes to the long-term debt problems of the US, which is not enabled by the four year election cycle. One way around this may be a long-term (longer than four years anyway), bi-partisan, debt-reduction strategy committee - my 2 cents worth, not Freidman's. That is, only if debt-reduction strategy is an important goal for governments.

Click here to read the full article.